Epidemic Failures Clauses

Summary

This epidemic failures clause, similar to an extended warranty clause, allows the originator to terminate the agreement should there be epidemic failure of units, as measured by a percentage from a single lot, successive failures in a given time frame, or manufacturer delays in delivery This template includes practical guidance and drafting notes. An epidemic failures clause helps to protect a buyer (Originator) to an agreement against the seller (Manufacturer) with expanded remedies for product failures. They are often heavily negotiated as their ability to create sizeable liability for the seller is common. As a result, sellers will often increase the price of their goods to ensure they can afford to fulfill the clause requirements in the event of a failure. This clause also address reimbursements, notice requirements and failure analysis. This clause is most commonly used in an original equipment manufacturing (OEM) agreement involving a buyer and seller. For a full listing of related contract clauses, see General Commercial Contract Clause Resource Kit. For more on standard warranty provisions, see Extended Warranties Clause and Extended Warranties and Service Contracts State Law Survey.